Momentum’s Building—These Assets Are Going Up!

Gold and silver are going up in price along with the stock market, which continues to benefit from the Federal Reserve’s inflationary policies. Right now, spot gold is just shy of $1,800 an ounce, which is a boon to gold mining companies. And silver is currently around $35.00 an ounce, lagging gold, but it’s a fair bet that corporate earnings for gold and silver companies will be significantly higher this earnings season and next.
With a robust outlook for gold and silver prices, I wouldn’t jump all over gold stocks right now—that trade was back in May, when spot prices were in correction. I’m all for momentum trading, but in precious metals, I think it pays to wait and employ the buy-low, sell-high investment strategy. Gold stocks are currently expensively priced and earnings will have to catch up to get multiples down, but this won’t be a problem with spot gold where it is.
Wall Street is starting to talk a lot more about gold and silver. Predictions are coming out of the woodwork, but they are almost all bullish; I can see the momentum building for $2,000 gold. If the current price momentum in the stock market continues to the end of this year, then I think $2,000 gold is a given. Oil might be the market’s barometer on the global economy, but spot gold is the barometer on prices; in a sense, gold is a gauge of the amount of easy (or cheap) money there is in the system.
Below is a near-term stock chart of SPDR Gold Shares (NYSE/GLD), which is one of the most popular gold trusts in the marketplace. This exchange-traded fund (ETF) has been going up consistently since 2005 and, at its current value, looks to have returned to its long-run trend.
As I’ve said, I wouldn’t necessarily be jumping on the current bandwagon in gold and silver. Commodities, as we know, are inherently volatile and reversals can be painful. And most stock market investors should already have some exposure to gold and silver, because the commodity price cycle has been so obvious for so many years and a weaker U.S. dollar is policy.
You can’t value gold and silver like you can a company’s cash flow. You can’t say that, based on a number of factors, gold should be worth $2,138 or $1,547 an ounce. But gold is the ultimate momentum play when all the pieces come together, and institutional investors have been proven to follow a herd mentality with this precious metal late in the game. Gold and silver prices are going up and, to me, it looks like the momentum is building.